A EUR 230 million loan for the reconstruction of public infrastructure and social housing was signed today in Algiers by Mr Saddek Alilat, Director-General of the Banque Algérienne de Développement, and Mr Philippe de Fontaine Vive, Vice-President of the European Investment Bank (EIB) with special responsibility for FEMIP, who was on an official trip to Algeria. During his visit Mr de Fontaine Vive reiterate the EIB's pledge to help rebuild the afflicted areas and, more generally, to demonstrate its support for development of the economy. To this end, the European Investment Bank will continue to participate in upgrading infrastructure in the country but stresses the need to speed up development of the private sector.

These meetings also afforded an opportunity to take stock of the achievements of FEMIP (Facility for Euro-Mediterranean Investment and Partnership) one year after its launch in Barcelona on 18 October 2002.

During his visit, Mr de Fontaine Vive commented: "I am delighted to be here in Algeria to formally announce the European Investment Bank's substantial financial support for reconstruction of the areas hit by the earthquake in May 2003. Today's signature of the finance contract illustrates EU solidarity towards the victims of the most violent earthquake in Algeria for 20 years. The EIB has already advanced EUR 45 million for financing the reconstruction of infrastructure in Algiers damaged by the severe flooding of November 2001. Deployed in close cooperation with the Algerian authorities, this aid will focus primarily on rebuilding social infrastructure and economic activity in the afflicted areas. I am pleased to point out, moreover, that this European solidarity also involves the European Commission and several of our Member States".

The components financed by the EIB under this first contract will supplement the priority rehabilitation and reconstruction works in the regions devastated by the earthquake. They are located in the Wilayas (Departments) of Algiers, Boumerdes, Tizi Ouzou, Tipaza, Bouira, Blida and Médéa. A large proportion of the schemes will be situated primarily in the Wilaya of Boumerdes where the damage was worst.

This first loan essentially aims to enable rehabilitation of housing and all basic economic and social amenities, including in the following fields: environment, transport, energy, health and education. Furthermore, to ensure economic recovery in the afflicted areas, a second loan of EUR 20 million is scheduled to be signed in early 2004 to help rebuild businesses in the stricken areas and revive economic activity.

The project will be coordinated by the Algerian Finance Ministry, on behalf of the technical ministries in charge of the various reconstruction works in their respective fields of activity. A Project Management Unit responsible for procurement, implementation and monitoring the cash flows relating to this reconstruction project will execute the works. A Technical Assistance Unit will be set up in the Finance Ministry and the technical control agencies will also be provided with help. This will be financed by a FEMIP grant.

The EIB's two very long-term loans (up to 30 years for public infrastructure) will be supplemented by funds from the European Union, the Agence Française de Développement (AFD) and various multi- and bilateral lenders. (1)

FEMIP was set up at the request of the Barcelona European Council (15 and 16 March 2002) and the Valencia Euro-Mediterranean Conference (22 and 23 April 2002). Its goal is to help the Mediterranean Partner Countries (MPC) meet the challenges of economic and social modernisation and enhanced regional integration with a view to the establishment of a Euro-Mediterranean free-trade area. It has enabled the EIB to step up its cooperation with the MPC. Thanks to this Facility, endowed with increased financial resources, the EIB will be able to gradually scale up its annual lending activity in the region from EUR 1.5 billion to EUR 2 billion.

FEMIP accords priority to financing private sector ventures, with the dual aim of liberalising the economies of the Mediterranean Partner Countries and developing their potential in the run-up to the planned creation of an EU/MPC customs union in 2010. FEMIP focuses on foreign direct investment and local private sector initiatives as well as social-sector projects, particularly in the fields of health, education and environmental protection, which are deemed to be fundamental in achieving social stability and encouraging productive investment.

The EIB's lending programme to assist areas hit by the May 2003 earthquake follows the EUR 45 million provided for reconstruction after the disastrous flooding of 10 November 2001 (urgent rehabilitation of the Frais Vallon urban road, construction of a rainwater drainage channel serving western Algiers, temporary repair followed by permanent strengthening of the Mustapha Breakwater in the port of Algiers and urgent rebuilding of 5 bridges on the RN 11 and CW 101 roads).

The EIB has been operating in Algeria as an element of the financial cooperation between the EU and this country since 1978. Its loans, totalling over EUR 1.9 billion, are concentrated on projects that have a fundamental impact on the economic development of the country, such as water supply and treatment schemes, irrigation, the East-West road and motorway network, industrial pollution abatement, urban roads and the port of Greater Algiers. Moreover, the EIB has supported the development of oil and gas resources and energy transport under international agreements linking Algeria and the EU Member Countries. In November 2002, the EIB financed Algeria's first private-sector cement plant in M'Sila. This project, clearly reflecting FEMIP's objectives, is the fruit of a South-South partnership between Egyptian and Algerian companies, ensuring technology transfer and reducing Algeria's dependence on hard currencies (see EIB Press Release: Reference: 2002-110 of 25 November 2002). Currently in the pipeline for EIB support are projects in the transport, national education and environmental improvement sectors.

This new operation ties in with ongoing EIB solidarity towards EU partner countries stricken by serious natural disasters: the Bank set up a dedicated facility for reconstruction in Turkey after the autumn 1999 earthquake and advanced loans following flooding in Poland, the Czech Republic, Hungary and Romania in the summer of 2002.

(1) European Union: EUR 13 million; Agence Française de Développement (AFD): EUR 50 million; Japan Bank for International Cooperation (JBIC): around USD 50 million; Saudi Fund for Development: some EUR 73 million; and Islamic Development Fund: amount yet to be determined.